Building Warranties Insurance

A latent defect policy otherwise known as building warranty or structural warranty insurance, is cover for the cost of rectifying or repairing structural damage to a building, caused by a fault in the design, faulty construction or imperfect materials. This applies to problems with a new build, a conversion or a completed build, that may not be apparent at the time of completion. The insurance will cover you from 8 to 12 years. The type of damage covered includes: damage caused by structural defects and ingress of water; remedial work to prevent threat of collapse; costs of dismantling, moving, storing and re-erecting property; as well as all professional fees. In addition, our polices can also include cover for component failure, which will protect you from the premature failure of nonstructural component parts such as: boilers, wiring, pipe work, and even kitchen units.

Apart from making sure your build is protected for every eventuality there are several other reasons that make latent defect or building warranty cover a necessity.

It’s worth noting that nearly all mortgage lenders will require a Latent Defects policy or building on any property under ten years old. This means that, without a building warranty, you will not be able to sell your property. Even if it was possible to sell a property without a building warranty, the legal fees and the time needed would far outweigh the cost and time of obtaining cover.

Additionally, if you have a rental portfolio and are looking to let your new build long term, you may need to refinance. In which case, you would also need a building warranty. And, while many developers may look at a building warranty as an unnecessary complication, if you are planning on living in your property it can actually save you money. This is because, not only does it protect in the ways mentioned above, but it will allow you avoid paying the Community Infrastructure Levy (CIL). This is a tax put in place by the planning act 2008 and came into force in 2010. It stipulates that new developments that create net additional floor space of 100 square metres or more, or creates a new dwelling, are potentially liable for the levy. The charge will be applied per square metre of new development and varies according to the development’s scale, use and location. This charge can easily equate to over £50,000. When you consider that the policy premium is less than half of that and will protect you from paying CIL, it makes economic sense.

How else does this insurance help you?

As you know, any type of construction project or property development can be extremely complex. Once the complicated and time-consuming planning stage is complete, you then have to bring all the physical aspects of the build together. You have to specify, source and supply building materials, from pilings, to bricks, to glass. You have to contract, schedule and coordinate Trades to carry out joinery, electrics, plastering and plumbing, without getting in each other’s way. You have to oversee the project to make sure the plans are followed and everything happens the way it should and at the right time. And all this usually has to be done to a specified budget and to an immovable deadline. Hopefully, at the end of all of this, you have a completed construction and a satisfied client. But what if problems become apparent after the build is complete and signed off? What if floors or walls shift due to unforeseen ground movement or faulty materials? What if a major problem develops with any load-bearing elements, threatening the integrity of the build? Even though all of these things may be outside of your control, your client could still hold you responsible and take legal action against you. And the resulting costs could cause you major financial difficulty and threaten your hard-won reputation. Which is why you need a Latent Defect Insurance or Building Warranty to protect you from such an eventuality. At Construction Insure, we’ve been brokering insurance to protect property developers and contractors like you for forty years, so you can trust us to get you the cover you need.

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GETTING THE RIGHT BUILDING WARRANTIES INSURANCE

Who needs a Latent Defects Insurance/ Building Warranty Insurance or Structural Warranty Insurance?

Structural warranties are usually bought by the developer, but the warranty itself will provide cover for the person who purchases the completed building: i.e. the owner. The reason the developer purchases the warranty is because, often there is a liability period where the developer is held responsible for the property before the risk is transferred to the insurance company (with the NHBC this will be three years, with Construction Insure the maximum this will be is two years). This is why we recommend that the developer has their JCT contract running for at least two years. This is because, if they only cover it for the length of build, (12 months in many cases) they will not have a contract in place if they need to call back the builder. Which means they will have to rectify the situation themselves, causing delays and the extra financial burden of finding a new builder. In some cases, the developer will own the property and plan to live in there after completion. They will still need a structural warranty policy in place as, for the first 10 years, regular buildings insurance will not cover latent defects.

How does Latent Defects Insurance help you?

Because there are so many aspects of a build outside of your control, you need to protect yourself, financially and legally from any claims against you. You put your trust in the Trades you commission to do a good job. But, sometimes they make mistakes. You have to be sure that the materials you purchase have no defects. But, sometimes they do. You give your attention to every detail of the build. But, sometimes an error will escape your notice. Latent Defects Insurance covers you for problems, resulting from factors like these, arising up to twelve years after the build is complete. The aspects of your development that the policy can cover are, for example: load-bearing foundations and footings; load-bearing beams, girder and lintels; roof joists and trusses; roof covering and chimneys; floor decking and screeds. The insurance will also cover you if waterproofing materials fail, leading to flooding. Your policy can also be extended to cover mechanical and electrical services, like air-conditioning and heating systems.

Why choose construction insure?

Our in-depth knowledge and experience in latent defect insurance means not only do we have access to a vast number of insurers but it means that we know exactly which providers to choose for your individual project. We the know the costs and benefits of each and will outline them for you fully. As a specialist in this field we can liaise with insurers to ensure you company is given the best deal and is not subject to any hidden escrows or retrospective costs. In accordance with this, unlike the NHBC, we have insurers that can provide a full risk transfer from day one and do not tie in the developer. In the event that the developer does need to have a liability period, the maximum this would be is two years. Unlike the NHBC who will not take over the property for three years.

How do you get the right advice?

Our insurers use independent engineers, surveyors and architects who will visit the property throughout the works to check everything is being built correctly. This will dramatically reduce the chance of a claim. Secondly, the NHBC have a set manual for how the property is to be built which limits the way it can be constructed. This means that in the event of a claim, if it does not coincide with the set manual, the claim will not be paid. Our insurers are not limited by a manual therefore, as long as the property is built to British standards, a claim will be paid.

Simply put, our policies are more comprehensive than the NHBC and our premiums are cheaper. So call us on 020 3958 6868 so we can talk to you about what you need and get you the cover that’s right for you.

What types of Latent Defect/ Building Warranty or Structural Warranty Insurance are there?

New Home Warranty

Our New Home Warranty has been designed for residential contractors building or converting private residential dwellings to sell. Cover is available for mixed-use developments and can contain cover for developer insolvency and alternative accommodation.

Social Housing Warranty

With our Social Housing Warranty, Housing Associations will be covered for up to 12 years on new build developments and conversions. Additionally, cover is available for loss of rent. And with a right-to acquire cover extension, this period of cover can be extended to 15 years warranty cover at no additional cost.

Completed Housing

Our Completed Housing scheme provides cover for properties which have been built without a latent defect policy in place. Our insurers can cover up to the balance of 10 years. For example, if your property is two years old, we can insure you for the remaining eight years.

Simple Completion

Simple Completion has been set up for any company or individual who is selling completed or partially completed homes, which they have acquired through developer insolvency. Simple Completion provides new site owners with the cover they require to meet the criteria of mortgage lenders, allowing them to sell their properties on the private market.

Self-Build

Self-Build Warranties have been designed for individuals building their own properties. Builders who are working on Self-Build developments can also apply for this cover on behalf of their clients. Unlike Architect’s Certificates, latent defects polices provide you with cover in the event of damage caused by a defect in your property. In order to be able to obtain a self-build warranty, you must be planning to live in the property for a at least one year following completion. If you are going to live in the property for less than this, then the New Home Warranty is the warranty for you.

Private Rental / Build-To-Rent (PRS)

Private Rental warranties provide cover required by funders and institutional investors in purpose-built private rental properties. These investments are required to be built to the correct standards and properly insured should structural defects occur. If structural problems occur, it could lead to large fees from the repair and maintenance costs, not to mention losses in yields. This warranty will cover failures in design, workmanship and materials for up to 12 years after completion. Even if the builder fails to rectify defects in the first year we have insurers who will cover this, meaning your investments are secured right from the start.

WHAT OUR CLIENTS SAY

" Comparing like with like plus some lower excesses you have managed to save me in excess of £1500 or approximately 15% on my previous insurer. "

- Hew Stevenson, March 2018

" We found you to be more thorough, efficient and reasonably priced than our existing insurer. We would not hesitate in recommending you to anyone."